Performance Accounts

Performance-based

Compensation; We work as one team.  If your

performance target is not met, October Effect’s

performance based fee is not paid.

 

How do performance-based management agreements work?

 

The performance base fee has two components:

First, there is a quarterly management fee, in the case of our aggressive derivatives portfolio the quarterly management fee is 70 basis points (0.70%/4=.175% per quarter)

Second, there is a performance-based fee, in the case of our aggressive derivative portfolio, the annual performance fee calculated after year-end will be 20% of gains.  To earn this performance fee, October Effect Ltd. must generate a return of 30% or greater.  Should the target be reached, then the account will be assessed the performance fee equal to 20% of the account gain for the calendar year just completed.  Said performance fees will be calculated in the first quarter of the new year.  There will be a high watermark.  Should the performance in any year be negative, the future performance fee will not include returning the account to the value before the negative year.  See the performance fee agreement for details on the calculation.

 

Our second performance-based fee agreement is an aggressive income and growth portfolio.  The annual fee on this portfolio will be 50 basis points (0.50%/4=.125% per quarter) assessed on a quarterly basis.  The performance fee will be 5% of the gains when a targeted gain of 12% or more has been reached.  Again, the high watermark criteria will apply.

 

Securities law, particularly the investment advisors act of 1940 sections 205 and 205-3, sets specific criteria to qualify a client to participate in a performance-based management account.

 

“Qualified Client”

 A qualified client must meet any one of the following criteria:

  1. An individual with at least $1 million in assets under management with October Effect Ltd. after entering into the investment advisor contract with the advisor.
  2. An individual with a net worth of more than @2.1 million, either by themselves or jointly with a spouse, immediately before entering into an advisory contract, excluding the value of their primary residence.
  3. An individual who, at the time the advisor contract is entered into, has ownership of at least $5 million of investments.
  4. An individual who is an executive officer, director, trustee, general partner, or person serving in a similar capacity, or the advisor of the advisor firm.
  5. An individual who is an employee of the advisor who participates in the investment advisory of the advisor and has done so for at least 12 months.